The Indian economy will grow by 6.9 per cent in this financial year (2012-13) notwithstanding problems like policy uncertainties, fiscal deficit and inflation, the World Bank projected on Tuesday, while cautioning that developing nations will have to face tougher times.
"India will see growth (measured at factor cost) increasing to 6.9, 7.2 and 7.4 per cent in fiscal years 2012-13, 2013-14 and 2014-15, respectively," the World Bank said in the report titled 'Global Economic Prospects' .
Referring to developments in 2011, the multi-lateral lending agency said that growth in India was particularly weak due to monetary policy, stalled reforms and electricity shortages.
These factors, along with fiscal and inflation concerns, cut into investment activity, it added. India's economic growth rate in 2011-12 slipped to a nine-year low of 6.5 per cent. The economy had expanded by 8.4 per cent in the preceding two years.
For the current fiscal, the government has pegged growth at 7.6 per cent. Considering global uncertainties and domestic woes, this growth rate could be tall order for the country.
"Growth in South Asia slowed to 7.1 per cent in 2011, from 8.6 per cent in 2010, as headwinds from the Euro Area crisis caused a steep deceleration in exports and a reversal of portfolio inflows," the report said.
Meanwhile, the global economy is expected to expand 2.5 per cent this year.
According to the World Bank, developing nations should prepare for a long period of volatility in the global economy by re-emphasising on medium term development strategies.
"Developing country growth will slow to a relatively weak 5.3 per cent in 2012, before strengthening somewhat to 5.9 per cent in 2013 and six per cent in 2014," it said.
"Growth in high-income countries will also be weak, 1.4, 1.9 and 2.3 per cent for 2012, 2013 and 2014, respectively – with GDP in the Euro Area declining 0.3 per cent in 2012. Overall, global GDP is projected to rise 2.5, 3 and 3.31 per cent for the same period," the report noted.
However, the World Bank pointed out that if the situation in Europe deteriorate sharply, no developing region would be spared.
Andrew Burns, lead author of the report, said that where possible, developing countries need to move to reduce vulnerabilities by lowering short-term debt levels, cutting budget deficits and returning to a more neutral monetary policy stance.
"Doing so will provide them with more leeway to loosen policy, should global conditions take a sharp turn for the worse," Burns added.